A collection account is a bank account that is used to hold the payments that are collected from the borrowers on the underlying assets in a securitisation transaction. The collection account is typically held by the special purpose vehicle (SPV) that was set up to hold the assets and issue the securities.
The collection account is an important part of securitisation, as it ensures that the payments from the borrowers are held in a secure location and that they are not commingled with the funds of the SPV. This helps to protect the investors in the securitisation, as they know that the payments that they are owed will be available to them.
Here are some examples of collection accounts in securitisation:
- A bank might securitise a pool of car loans. The SPV would then set up a collection account to hold the payments from the borrowers on the car loans.
- A company might securitise a pool of receivables. The SPV would then set up a collection account to hold the payments from the customers who owe the money.
The collection account is an important part of securitisation, and it is essential that the SPV has a strong collection team in place to ensure that the payments are collected and deposited into the collection account in a timely manner.